Definition: A signature card is a document that a bank keeps on file with the signatures of all the authorized people on that account. The bank employees can use this card to verify signatures on checks to make sure the proper people sign them. In other words, a signature card is a fraud prevention tool that a bank uses to make sure unauthorized people aren’t forging checks in the company’s name.
What Does Signature Card Mean?
Most banks require a signature card be filled out when a business bank account is created. The card is simply a listing of people who are authorized to sign checks and make changes to the account. Each person listed on the card is also required to sign it, so the bank has an example signature to compare future signatures with.
If a bank employee suspects something wrong with a check on the account, they can simply look up the card and compare the signatures to see if the check was actually authorized by the right person or if it was forged.
Example
Since most businesses have multiple bank accounts, a signature card can also be used to identify the specific people who only have authorization to specific accounts. For example, companies often set up separate bank accounts for payroll. This way the main operating account doesn’t have to write a payroll check to each employee.
At the end of a pay period, the main account simply transfers the total payroll amount to the payroll account and the payroll bank account actually writes the checks to the employees. This double bank account system cleans up the bank reconciliations for the main account and it also helps prevent fraud.
The signature card can specify that one employee is only authorized to write checks from the payroll account and not the main operating account.
